National Conference of Bar Examiners v. Multistate Legal Studies, Inc.

Citation692 F.2d 478
Decision Date02 November 1982
Docket NumberNo. 81-2271,81-2271
Parties, 1982 Copr.L.Dec. P 25,463 NATIONAL CONFERENCE OF BAR EXAMINERS and Educational Testing Service, Plaintiffs and Counterdefendants-Appellees, v. MULTISTATE LEGAL STUDIES, INC., Defendant and Counterplaintiff-Appellant.
CourtUnited States Courts of Appeals. United States Court of Appeals (7th Circuit)

Paul F. Stack, Chicago, Ill., for defendant and counterplaintiff-appellant.

Thomas J. Byrnes, Dept. of Justice, Commercial Litigation Branch, Civ. Div., Washington, D.C., Robert M. Newbury, Chicago, Ill., for plaintiffs and counterdefendants-appellees.

Before SWYGERT, Senior Circuit Judge, BAUER, Circuit Judge, and DAVIES, Senior District Judge. *

SWYGERT, Senior Circuit Judge.

In this action for copyright infringement and unfair competition defendant and counterplaintiff-appellant Multistate Legal Studies, Inc. appeals from a permanent injunction imposed by the district court against Legal Studies' use of the names PRELIMINARY MULTISTATE BAR EXAMINATION and PMBE to designate its test preparation service and the practice examination administered therein. The district court held that such use violated the unregistered trademark of the plaintiffs and counterdefendants-appellees, the National Conference of Bar Examiners and the Educational Testing Service in the MULTISTATE BAR EXAMINATION or MBE. In addition, Legal Studies appeals from the order of the district court dismissing its counterclaim which challenged the validity and constitutionality of the Copyright Office "secure test" regulation, 37 C.F.R. Sec. 202.20, under which plaintiffs' MULTISTATE BAR EXAMINATION was registered. For the reasons stated herein, we affirm the judgment order of the district court's dismissal of the counterclaim, 495 F.Supp. 34, but we reverse the order enjoining Legal Studies from using the name PRELIMINARY MULTISTATE BAR EXAMINATION and the initials PMBE.

The facts of this case are undisputed. The plaintiff National Conference of Bar Examiners is a cooperative organization of members of the boards of state bar examiners having supervision over admission to the bars of the various states. The plaintiff Educational Testing Service is a nationally recognized organization engaged in the development and administration of tests and testing programs which are used nationwide by educators and educational administrators. As a joint venture, the plaintiffs are engaged in the preparation and distribution of examinations used by the various state bar admission boards in testing candidates for admission to the bar. The plaintiffs' MULTISTATE BAR EXAMINATION (MBE) is an objective multiple choice test which has been administered to bar applicants twice yearly since 1972 to determine their competency to practice law.

The defendant Multistate Legal Studies, Inc. is a Delaware corporation having its principal place of business in Philadelphia, Pennsylvania and Chicago, Illinois. In 1977 Legal Studies began conducting bar review seminars using study materials that it developed to prepare bar applicants to take the plaintiffs' MULTISTATE BAR EXAMINATION. Upon payment of a fee, bar applicants are enrolled in defendant's course at locations across the country and administered a practice examination patterned after the plaintiffs' MULTISTATE BAR EXAMINATION. The defendant began using the name PRELIMINARY MULTISTATE BAR EXAMINATION in 1978 to denominate the examination that it offered in its review course. The name subsequently became associated with the course as a whole as well as the examination developed by the defendant.

Legal Studies advertises and promotes the name PRELIMINARY MULTISTATE BAR EXAMINATION or PMBE throughout the country in magazine advertising, posters, and fliers circulated among the various law schools. In this advertising Legal Studies has repeatedly used the term "official publication" in reference to its course materials and claimed to have included in the PRELIMINARY MULTISTATE BAR EXAMINATION 120 questions reconstructed from plaintiffs' July 1978 MULTISTATE BAR EXAMINATION.

The plaintiffs filed a two-count complaint on October 26, 1978 in the Northern District of Illinois. In Count I plaintiffs alleged that Legal Studies, in violation of the copyright laws of the United States, infringed their copyright in the MULTISTATE BAR EXAMINATION by copying from one or more editions of their copyrighted July 1977, February 1978, and July 1978 bar examinations. According to the plaintiffs, Legal Studies' illegal copying was indicated by its literature which claimed that the PRELIMINARY MULTISTATE BAR EXAMINATION contained reconstructed questions from the MULTISTATE BAR EXAMINATION. In Count II of the complaint plaintiffs alleged that Legal Studies engaged in unfair competition in violation of the trademark laws of the United States, 15 U.S.C. Sec. 1125(a), and the Uniform Deceptive Trade Practices Act, Ill.Rev.Stat. ch. 121 1/2, Sec. 311-17, by falsely representing in its advertising and promotion that its examination was in some way connected with the plaintiffs or their product through use of the names PRELIMINARY MULTISTATE BAR EXAMINATION or PMBE and through its claim that the PMBE was an "official publication."

Legal Studies answered and counterclaimed in three counts. Subsequently, it moved for summary judgment on Count III of its counterclaim by which it sought a declaration that plaintiffs' copyrights were invalid on the ground that 37 C.F.R. Secs. 202.20(b)(4) and (c)(2)(vi), which permits registration of secure tests by the deposit of identifying material in lieu of complete copies, exceeds the statutory authority of the Register of Copyrights and in the alternative, that 17 U.S.C. Sec. 408(c), which authorizes the issuance of the secure test regulation, is unconstitutional for being in excess of power granted to Congress in art. I, Sec. 8, cl. 8, of the United States Constitution. 1

On January 29, 1980 the district court continued Legal Studies' motion for summary judgment on Count III of its counterclaim so that Legal Studies could join the Register of Copyrights as a party defendant. On the plaintiffs' motion the court dismissed Counts I and II of Legal Studies' counterclaim challenging the capacity of the plaintiffs to obtain a copyright and the legal qualification of the MULTISTATE BAR EXAMINATION for copyright protection.

After Legal Studies filed an amended counterclaim joining Barbara Ringer, Register of Copyrights, as a party defendant, the district court issued an order on July 31, 1980 dismissing Count III of Legal Studies' amended counterclaim pursuant to motions to dismiss filed by the plaintiffs and the Register of Copyrights. The district court held that the plaintiffs' copyrights were valid and concluded that section 408(c)(1) was sufficiently broad to accommodate the regulation that was adopted by the Register for secure tests. 2 The court found that, contrary to Legal Studies' assertion, no conflict existed between the regulation and 17 U.S.C. Sec. 704(d), which provides that in the case of unpublished works a reproduction of the entire deposit must be made a part of Copyright Office records. The court took the view that when read in conjunction with section 408(c)(1), the term "entire deposit" in section 704(d) refers to the excised copies rather than a complete copy of the test as maintained by Legal Studies. 3 The court found no merit in Legal Studies' assertion that the failure to register a complete deposit for copyright purposes is contrary to the public interest as implied in the Constitution, citing Washingtonian Publishing Co. v. Pearson, 306 U.S. 30, 41-42, 59 S.Ct. 397, 402-403, 83 L.Ed. 470 (1939).

Subsequently, on March 30, 1981, plaintiffs obtained leave to file a second amended complaint. This complaint omitted the allegations of copyright infringement and pled only the single count of unfair competition. A bench trial of the unfair competition claim was held on June 30 and 31, 1981, which resulted in a final judgment permanently enjoining Legal Studies from using the words PRELIMINARY MULTISTATE BAR EXAMINATION and the initials PMBE or making any other false representation or description implying that its examination or review course were sponsored by or had some official connection with the plaintiffs or the MULTISTATE BAR EXAMINATION.

On July 10, 1981 the district court denied Legal Studies' previously-filed motion for reasonable attorney's fees based upon the plaintiffs' dismissal of Count I of their complaint on the rationale that the complaint was filed in good faith and there was at least an arguable infringement of the plaintiffs' copyright. The plaintiffs said that their reason for dismissing Count I was that the alleged infringement had ceased and there was no evidence that it had occurred since 1979, thus obviating the need for injunctive relief and substantial damages. The district court, in addition, surmised that plaintiffs dismissed Count I because of an earlier ruling that that particular issue was subject to a trial by jury. This appeal followed. Legal Studies challenges the rulings of the district court in plaintiffs' favor on the copyright claim, the unfair competition injunction, as well as the denial of attorney's fees and the taxing of certain items of costs to Legal Studies. We shall address each issue seriatim.

I

Legal Studies seeks, among other things, a declaration that the Copyright Office regulation which governs the deposit requirements for secure tests--37 C.F.R. Sec. 202.20(c)(2)(vi)--is inconsistent with the Copyright Act of 1976, or, alternatively, that section 408(c)(1) of the Copyright Act, 17 U.S.C., which empowers the Copyright Office to promulgate the secure test regulation, is unconstitutional. Legal Studies also seeks a cancellation of plaintiffs' copyright registration of the MULTISTATE BAR EXAMINATION obtained in accordance with the challenged regulation.

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